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Re­im­burse­ment cuts threaten lo­cal economies re­ly­ing on hos­pi­tal jobs

Modern Healthcare - - Front Page - Den­nis Von­der­fecht

Re­im­burse­ment cuts threaten lo­cal economies

As those in Congress and the Obama ad­min­is­tra­tion con­tinue to de­bate deficit re­duc­tion leg­is­la­tion with an eye on the cost of health­care, I hope our elected of­fi­cials will keep in mind the crit­i­cal role our nation’s com­mu­nity hos­pi­tals play in the economies of ev­ery city and town across the coun­try. In most com­mu­ni­ties in our coun­try, hos­pi­tals are one of the largest, if not the largest, em­ploy­ers. As a re­sult, they are also one of the pri­mary driv­ers of the lo­cal econ­omy in their com­mu­ni­ties.

In 2009, the Amer­i­can Hos­pi­tal As­so­ci­a­tion came to an agree­ment with the fed­eral gov­ern­ment in the craft­ing of the Pa­tient Pro­tec­tion and Affordable Care Act: The nation’s hos­pi­tals agreed to cuts of $155 bil­lion in gov­ern­ment re­im­burse­ments over a 10-year pe­riod, while the gov­ern­ment pledged to ex­tend cov­er­age to 32 mil­lion more Amer­i­cans.

The suc­cess of this agree­ment hinges on pro­vid­ing cov­er­age for vir­tu­ally all Amer­i­cans, and I fear the leg­is­la­tion that was passed will not bring this re­sult. Even if the in­di­vid­ual man­date to buy in­surance with­stands po­lit­i­cal and legal chal­lenges, it is clear that many in­di­vid­u­als and busi­nesses will forgo health in­surance cov­er­age, in­stead opt­ing for the less costly tax penalty. This does noth­ing to ad­dress the is­sue of the unin­sured, and in fact may ac­tu­ally re­sult in fewer Amer­i­cans hav­ing cov­er­age.

In so many com­mu­ni­ties across our nation, hos­pi­tals are among the largest eco­nomic en­gines driv­ing lo­cal com­merce. In fact, the AHA re­cently re­ported that hos­pi­tals are the sec­ond-largest source of pri­vate­sec­tor jobs in the U.S. We find this to be true in our own lo­cal mar­ket as well. Stud­ies con­ducted re­cently by East Ten­nessee State Univer­sity’s Col­lege of Busi­ness and Tech­nol­ogy re­vealed the crit­i­cal eco­nomic role Moun­tain States Health Al­liance plays in Ten­nessee and Vir­ginia.

MSHA is a 10-hos­pi­tal sys­tem in the heart of South­ern Ap­palachia. Our ma­jor ter­tiary re­fer­ral cen­ter and net­work of 12 smaller com­mu­nity hos­pi­tals serves 29 coun­ties in four states. The ma­jor­ity of the money spent by MSHA hos­pi­tals stays in the im­me­di­ate area in the form of em­ployee in­come and lo­cally pur­chased goods and ser­vices. ETSU’s study found that in 2010 alone, MSHA brought $1.3 bil­lion to the re­gion. This spend­ing sup­ported more than 12,000

The AHA re­cently re­ported that hos­pi­tals are the sec­ond-largest source of pri­vate-sec­tor

jobs in the U.S.

jobs, rep­re­sent­ing more than $530 mil­lion in la­bor in­come in a re­gion hit par­tic­u­larly hard by the re­ces­sion.

A sig­nif­i­cant por­tion of MSHA’s re­cent eco­nomic im­pact has re­sulted from a se­ries of con­struc­tion projects, which we have re­mained com­mit­ted to pur­su­ing, even when the lo­cal and na­tional eco­nomic cli­mate has made such ex­pen­di­ture dif­fi­cult. Three sep­a­rate projects ac­counted for nearly $104 mil­lion of our to­tal eco­nomic im­pact in 2010, sup­port­ing 752 jobs and more than $31 mil­lion in la­bor in­come. Time and again, our lo­cal con­trac­tors told us our projects meant the dif­fer­ence be­tween keep­ing work­ers em­ployed and lay­ing them off. These fig­ures show the nat­u­ral growth and evo­lu­tion of the health­care in­dus­try also sup­ports eco­nomic growth and fi­nan­cial sta­bil­ity in the sur­round­ing re­gions.

If the Affordable Care Act fails to bring the vast ma­jor­ity of Amer­i­cans health­care cov­er­age, hos­pi­tals will be hard pressed to forgo $155 bil­lion in re­im­burse­ment with­out suf­fer­ing sig­nif­i­cant eco­nomic set­backs that would com­pro­mise their abil­ity to con­tinue fi­nan­cially en­rich­ing their sur­round­ing com­mu­ni­ties.

Con­sider the eco­nomic quag­mire cre­ated by Ten­nessee’s Med­i­caid waiver pro­gram, Ten­nCare. In 1994, the Ten­nCare pro­gram was un­veiled with the prom­ise that, al­though providers would ex­pe­ri­ence sig­nif­i­cant re­duc­tions in re­im­burse­ment, those losses would be more than mit­i­gated by the pro­vi­sion of cov­er­age for vir­tu­ally all Ten­nesseans.

His­tory re­veals, how­ever, that this agree­ment failed all par­ties—the pa­tients, the providers and the state. Ten­nCare re­im­burse­ments were im­pos­si­bly low, yet over­all ex­pen­di­tures still bal­looned out of con­trol. Af­ter a decade, the state was forced to ex­e­cute a mas­sive dis­en­roll­ment, re­mov­ing 190,000 peo­ple from Ten­nCare rolls in or­der to keep the en­tire pro­gram from col­laps­ing. We can see from Ten­nCare’s ex­am­ple that when a large por­tion of the pop­u­la­tion used to cal­cu­late the orig­i­nal risk as­sess­ment does not re­ceive vi­able cov­er­age in the fi­nal prod­uct, the re­sults can be cat­a­strophic.

Some in Congress have ar­gued that health­care re­form is about eco­nom­ics, and I would agree. I think it is ob­vi­ous that a thriv­ing health­care in­dus­try sup­ports a large num­ber of sta­ble, high-earn­ing jobs and keeps dol­lars flow­ing for lo­cal ar­eas even in tough eco­nomic times. This nation’s health­care providers are, col­lec­tively, an in­dus­try that plays a ma­jor part in the na­tional econ­omy. But they are also so much more than that.

Amer­ica’s health­care sys­tem de­pends heav­ily on com­mu­nity hos­pi­tals, which are more than just out­lets of care for lo­cal pa­tients; the hos­pi­tals them­selves are mem­bers of the com­mu­nity. The health­care cov­er­age is­sues that threaten Amer­ica’s providers at large have an im­me­di­ate and very real im­pact on com­mu­nity hos­pi­tals and Main Street economies across the nation. I gen­uinely hope the crit­i­cal eco­nomic im­pact hos­pi­tals such as ours have on lo­cal com­mu­ni­ties is not for­got­ten dur­ing the on­go­ing de­bate over the fed­eral bud­get and health­care costs.

Den­nis Von­der­fecht is pres­i­dent and CEO ofMoun­tain States

Health Al­liance, John­son City, Tenn.

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